Though situations can differ, a basic plan for a person that recently started earning high income might look something like the following. Draft a will, trust, durable financial and healthcare powers of attorney with incapacity clauses, and other documents needed by your dependents in-case of disabling affliction or death. Also, purchase 20 to 30-year equal premium term life, long-term care, umbrella, and other insurance coverages you need and make sure you assign appropriate beneficiaries to all your insurance, savings, and investment accounts.
Let’s say you make $1 million and receive $600,000 after taxes. You should forsake debt. You should not borrow to buy or do things. The tithe, offerings, and alms may be about $112,000. In the first year of earning high income, save $300,000 in an emergency fund (6 months take home pay). Rent a nice apartment for $2000 per month ($24,000 annually). Buy a $30,000 car debt-free. Invest $86,000 in a diversified portfolio of no load low expense stock index mutual funds. And, keep $4,000 of monthly spending money ($48,000 annually) for groceries, utilities, insurances, personal needs, and desires.
The second year, give tithes, offerings, and alms of $124,000. Continue to live in the $24,000 per year apartment, keep your debt-free car, invest $300,000, and increase your monthly spending money to $5,000. The remaining $92,000 could be put into a high-yield money market account for an eventual home purchase after your fifth year of earning high income. Pay increases will help increase giving, saving, investing, and spending. Repeat this plan over the next few years.
In the sixth year, you will have accumulated approximately $1.5 million for retirement and future business endeavors. Do not overlook the fact that if you do not earn as high an income in future years, you will need substantial liquid wealth from which you can draw an income that allows you to live in the manner you are accustomed to. As you get older you will need greater comfort and convenience than you need now. You could also modestly increase spending and purchase a home debt-free with cash you diligently saved (at least $460,000). Any savings remaining could be put toward the debt-free purchase of a new car.
No plan is perfect, however having a plan based on biblical principles is the right way to go. Undisciplined spending with no attention to budgeting, staying out of debt, giving, saving, investing, and purchasing things to impress people will ultimately put you in financial bondage. You will be broke, disgusted, and can’t be trusted like many former high-income earning athletes and entertainers who did not responsibly manage money during their careers. You never have to be in that position because you have Holy Spirit power and ability within you to do better while bringing honor to Him in the process.
Please pray for this ministry and email me with any questions. May the LORD bless you richly as you follow His plan!
Genesis 1:27, Exodus 19:5, Psalms 50:10, Ecclesiastes 12:1, Ephesians 3:9
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